Tuesday, October 25, 2016
Alan Newman recently published an Article entitled, Trust Law in the Twenty-First Century: Challenges to Fiduciary Accountability, 29 Quinnipiac Prob. L.J. 261 (2016). Provided below is a summary of the Article:
This Article analyzes recent legislative trends in trust law that undermine--sometimes intentionally and sometimes inadvertently--fiduciary accountability in the administration of trusts. A primary focus in this analysis is the growing use of third parties, often referred to as “advisers” or “protectors,” who are authorized to exercise control over the trustee's administration of the trust, and newly enacted statutes addressing their use in many jurisdictions. But fiduciary accountability for trustees has been weakened in recent years by state legislatures in a variety of other ways. Before turning to recent legislation addressing trust advisers and protectors, this Article examines statutes addressing: (i) exculpatory clauses; (ii) the trustee's duty to account; (iii) the limitations period for a beneficiary to pursue a claim against a trustee for breach; (iv) the trustee's duty of loyalty; (v) the nature of a beneficiary's interest in a discretionary trust; and (vi) trust decanting.
Saturday, September 10, 2016
Attorney-client privilege might be the most ancient of the confidential communication privileges. The privilege was codified in Florida at § 90.502. As time passed, the law evolved, creating an exception to privilege—the fiduciary-duty exception for when the client was a fiduciary and the lawyer’s services were for a third party. In 2011, however, Florida enacted § 90.5021, the fiduciary-lawyer client privilege, which appeared to infringe on the exception. This Section defines who qualifies as a fiduciary and further explains that the fiduciary-lawyer relationship would be protected just the same as a non-fiduciary relationship. Additionally, the Section explains that only the fiduciary is considered a client of the lawyer.
In Bivins v. Rogers, the plaintiff was the personal representative of his father’s estate. The defendant was one of several guardians appointed to exercise the father’s rights. After his father’s death, the plaintiff sued, seeking production of communication between the defendant and his attorneys and accountants. The question to the court was whether § 90.2051 precludes someone besides the client from waiving privilege when the client is a fiduciary. The court held that it does. This ultimately suggested that there was no ambiguity about the statute’s validity, making the fiduciary-duty exception irrelevant.
See Jordan Hammer, Personal Representative Cannot Waive Privilege Between Guardian and Attorney, Florida Probate Lawyers, September 8, 2016.
Monday, August 29, 2016
RICO charges are normally used as a civil remedy in claims of significant criminal activity and provide for treble damages. Recently, the Second Circuit ruled that RICO claims can also be brought in connection with unlawful activities by an executor of an estate.
In King v. Wang, before and during the administration of Wang’s estate, the Defendant allegedly engaged in a scheme to deprive the Plaintiffs of their expected inheritance. The Plaintiffs filed RICO claims. The Second Circuit affirmed federal jurisdiction over the claims, determining that the claims fell outside the probate exception.
See Jeffrey Skatoff, Can a RICO Claim be Brought Against an Executor of an Estate?, Florida Probate Lawyers, August 27, 2016.
Wednesday, August 24, 2016
In a federal antitrust complaint, an heir-location services firm and its co-owner were charged with conspiring to allocate customers with a competitor. The firm had a 15-year-long streak of allocating customers to co-conspirators “to suppress and eliminate competition.” Similar cases have included a criminal fine of $890,000.
See Jonny Bonner, Heir-Location Firm Charged in Antitrust Probe, Courthouse News Service, August 22, 2016.
Special thanks to Deborah Matthews (Attorney, Alexandria, Virginia) for bringing this Article to my attention.
Saturday, August 20, 2016
Max M. Schanzenbach & Robert H. Sitkoff recently published an Article entitled, Financial Advisers Can’t Overlook the Prudent Investor Rule, J. Financial Planning (2016). Provided below is an abstract of the Article:
This article calls attention to the Department of Labor’s imposition of the “prudent investor rule” on financial advisers to retirement savers. This article also canvasses the customary role of an investment policy statement in promoting compliance with the prudent investor rule by professional fiduciaries.
In April 2016, the Department of Labor promulgated a rule that imposes on financial advisers to retirement savers “fiduciary” status under the Employee Retirement Income Security Act. The Department reasoned that the fiduciary duty of loyalty was necessary to protect retirement savers from conflicted investment advice. But in addition to a duty of loyalty, ERISA fiduciary status also imposes a duty of care or prudence. And with respect to investment management, the fiduciary standard of care is governed by the “prudent investor rule.” The basic tenets of the prudent investor rule are grounded in modern portfolio theory. In short, the prudent investor rule requires diversification and an overall investment strategy having risk and return objectives reasonably suited to the purpose of the investment account.
Thursday, August 11, 2016
A true estate planner is able to foster trustworthy relationships with their clients while serving them in the fullest capacity. If you notice a gap in an estate-planning document, realize this red flag and know how to solve it.
When creating an estate plan, one goal many clients have is to avoid probate; on the other hand, a lot of clients draft a properly written will. Make sure that your clients goals are met and fill any gap in this estate-planning document. If a trust is in the estate plan, make sure that there is proper funding. Also, protect your client’s assets from creditors by never leaving valuable assets exposed. Similarly, do not leave inheritances in the hands of uninformed beneficiaries who can expose their gifts to creditors as well. Another good idea is to appoint trustees in a manner that gets the job done; you do not want fighting or miscommunication to burden future heirs. Furthermore, a planner should make sure that all account beneficiaries are updated along with any estate-planning documents. Accordingly, life insurance should be right for your client’s situation, determining whether too little or too much insurance can pose a problem. Finally, emphasize to your clients that they need a long-term care arrangement, helping with any unforeseen medical expenditures.
See Eight Red Flags That Your Client’s Estate Plans Are Out of Whack, Wealth Management, August 5, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Friday, August 5, 2016
When bringing an action for breach of fiduciary duty for failure to provide a Florida trust accounting, timeliness of the action is key. If the beneficiary does not timely file, then they will not be entitled to an accounting. There is a four-year statute of limitations for bringing this type of claim; however, there is an exception—if the beneficiary receives a receipt of limitation notice, then a six-month limitation is triggered, as discussed in Woodward v. Woodward. In Corya v. Sanders, however, based on the facts of the case, the court concluded that beneficiaries who had not received accountings or limitations notice could not request accountings going back over four years.
See Anya Van Veen, Florida Trust Accountings: 4 Years or 6 Months to Sue? Woodward v. Corya, Florida Probate Lawyers, August 4, 2016.
Friday, July 29, 2016
Amir N. Licht recently published an Article entitled, Motivation, Information, Negotiation: Why Fiduciary Accountability Cannot Be Negotiable, D. Gordon Smith & Andrew S. Gold, eds., Research Handbook on Fiduciary Law (Forthcoming). Provided below is an abstract of the Article:
In the debate over contractual freedom or enabling-versus-mandatory rules in fiduciary law, those who do not adhere to an unbridled contractatian approach tend to justify fiduciary law’s strict posture by appealing to transaction cost reasoning. In this view, fiduciary law more efficiently sets rules that the parties would adopt or, also efficiently, sets penalty default rules that they would not adopt. Drawing on new institutional economics and information economics, this paper advances another theory on the appropriate scope of contractibility with regard to fiduciary loyalty. The present account highlights information asymmetries that are more tenacious than those stemming from information production costs - to wit, asymmetries due to unobservable and unverifiable information. These asymmetries provide a compelling justification for a strict, full-disclosure-based accountability regime. A similar analysis vindicates a rather similar legal policy in traditional insurance law, in which insurance relations are based on utmost good faith and impose a duty of full disclosure on the insured.
Tuesday, June 21, 2016
Max M. Schanzenbach & Robert H. Sitkoff recently published an Article entitled, Fiduciary Financial Advice to Retirement Savers: Don’t Overlook the Prudent Investor Rule, Harvard John M. Olin Center for Law, Economics, and Business, Discussion Paper No. 867 (2016). Provided below is an abstract of the Article:
Americans now hold trillions of dollars in individual retirement savings accounts, raising concerns about conflicts of interest among financial advisers who provide advice to retirement savers. Prompted by these concerns, in April 2016 the Department of Labor promulgated a rule that imposes on financial advisers to retirement savers “fiduciary” status under the Employee Retirement Income Security Act. The Department reasoned that the fiduciary duty of loyalty would protect retirement savers from conflicted investment advice. But in addition to a duty of loyalty, fiduciary status also imposes a duty of care. With respect to investment management, the fiduciary standard of care is governed by the “prudent investor rule,” which is grounded in modern portfolio theory and requires an overall investment strategy having risk and return objectives reasonably suited to the purpose of the investment account. This essay calls attention to the regulatory imposition of the prudent investor rule on financial advisers to retirement savers. The essay also canvasses the basic tenets of the prudent investor rule, highlighting its nature as principles-based rather than prescriptive, and the customary role of an investment policy statement in compliance by professional fiduciaries.
Monday, June 13, 2016
Department of the Treasury, Customer Due Diligence Requirements for Financial Institutions, AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury. ACTION: Final rules. Provided below is a summary:
FinCEN is issuing final rules under the Bank Secrecy Act to clarify and strengthen customer due diligence requirements for: Banks; brokers or dealers in securities; mutual funds; and futures commission merchants and introducing brokers in commodities. The rules contain explicit customer due diligence requirements and include a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions.